Nov 142010

Going green is a smart moral choice, but you have to consider the bottom line. With federal tax benefits, you can have your pie and eat it to.

The Internal Revenue Service tax code is not an easy thing to understand. The federal tax benefit though can be found in Subtitle A, Income Taxes. It is under Chapter 1, normal taxes. You must look in subchapter A, Determination of Tax Liability. Then you go to part IV, Credits against Tax, and finally to Subpart A, nonrefundable personal credits. You just have to love the IRS.

In case you do not have the tax code handy, the tax benefit is not that complex. It allows a 30 percent credit on any expenditure for a qualified photovoltaic property used on a private residence within the tax year. It also allows a 30 percent credit on any qualified fuel cell property used on a private residence. The same 30 percent credit is allowed on a solar water heater under the same conditions.

This credit does have a limit of $2000 on the photovoltaic and fuel cell credit, and $500 on the solar water heater. The code also explains how the credit is to be divided in the case of multiple occupants or change of ownership. Although the tax credit is limited and only covers a certain portion of the green construction spectrum, it is an indication of the interest of the federal government. The credits basically deal with items that reduce energy consumption or use alternate energy sources. This is a reflection of the desire to reduce the burning of fossil fuels and the continued waste of energy in the country.

The tax code is very specific about the purposes of the properties that qualify for the credit. They must relate to a building that is used as a private dwelling. The water heater must also be used to heat water for regular domestic purposes. Such luxury items as swimming pools, hot tubs, and saunas would be excluded. The use of items in the structure of the building is allowed. For examples, solar panels that constitute the roof of the structure are still covered under the credit provisions.

This tax benefit does not cover any building done after December, 31, 2007. This means this is the last year to take advantage of the tax benefit as it is currently written. In order to be extended past this date, new legislation must be passed by congress. It will be interesting to see if the tax benefit for green construction is continued. It is generally believed such benefits will not only be continued, but also expanded.

Zack Verde is with – providing information on going green.

Author: Zack Verde
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